Antitrust Exemption for Doctors May Be Risky Panacea for HMO Ills

Michael Connair loved working as an orthopedic surgeon, at least until managed care moved into his corner of Connecticut about five years ago. Then, like many of his colleagues, the Harvard-educated Connair got an offer he believed he couldn’t refuse.

“A very nice lady from Blue Cross of Connecticut came to my office and said: ‘You don’t have to sign this contract, but if you don’t, we know some of your competitors across town will and you only have a little time to make up your mind.’

“There was no chance for negotiation,” he said, “and it was a horrible contract.”

The agreement not only reduced the reimbursement rate for Connair’s medical services, it required him to defer to a medical administrator who could overrule the physician’s decisions to prescribe certain drugs or refer patients to specialists.

Blue Cross covered more than 20% of his patients, however, and Connair did not want to lose them. So he signed. But he also became a political activist.

Connair and many doctors like him are becoming convinced that, individually, they are no match for the giant health maintenance organizations. They argue that, if they cannot band together against the HMOs, both they and their patients will be the losers.

But antitrust laws bar independent contractors, including doctors, from getting together to manipulate their fees. So Connair has joined a growing roster of physicians who support legislation that would exempt doctors from those laws so they can join forces and bargain collectively. (Only a handful of groups currently enjoy exemptions from antitrust laws; among them are farmers, fishermen and export businesses.)

Authored by Rep. Tom Campbell (R-San Jose), the antitrust exemption bill is slated to arrive on the House floor this week.

Campbell’s proposal puts physicians on a collision course not only with the insurance industry and employer groups, but with the Clinton administration and some consumer organizations. Opponents argue that doctors are merely out to enrich themselves--and that HMOs, employers and, ultimately, patients would have to foot the bill.

“It’s the most anti-consumer piece of legislation we’ve seen in decades,” said Karen Ignagni, president of the American Assn. of Health Plans, which represents about 1,000 managed care plans. “This issue has been under the radar screen, but it is a license for doctors to collude.”

Robert Pitofsky, chairman of the Federal Trade Commission, recently told the House Judiciary Committee: “Consumers and employers would face higher insurance premiums, consumers would pay more out of pocket and could see their benefits reduced. The number of uninsured Americans could increase significantly.”

The FTC has some compelling evidence. The agency has issued orders in at least 50 cases in the last 20 years to stop doctors from engaging in anti-competitive activity. The Justice Department, which shares jurisdiction with the FTC over antitrust enforcement, has also prosecuted a handful of cases and strongly opposes the proposed exemption.

Doctors, however, point out that many of those cases date from an earlier era, before the consolidation of HMOs and insurers. Today, they say, doctors are unable to coordinate efforts to improve patient care for fear that their HMOs will report them to the FTC.

“We cannot even advocate together for quality care issues,” said Donald Palmisano, a New Orleans surgeon who is a member of the American Medical Assn.’s board of trustees. “If I get together with a competitor and we go to complain to an insurance company that they are taking away our ability to decide when a treatment is medically necessary . . . , we face prosecution by the Federal Trade Commission and the Department of Justice. And physicians are frightened of that.”

Insurance policies taken out by doctors do not cover the cost of defending against antitrust litigation, Palmisano said. Even if a physician ultimately is exonerated, he may wind up paying $100,000 or more just to get a lawyer to see him through such an investigation by the government.

Doctors complain that regulators have their sights trained on the wrong targets.

“These big HMOs are the Carnegies and the Rockefellers of this day and age,” said Dr. Chris Casscells, a Delaware physician who has battled the Justice Department over efforts by a group of doctors to negotiate fees and contract provisions with Blue Cross/Blue Shield of Delaware.

Connecticut Atty. Gen. Richard Blumenthal, who has been investigating managed care plans for possible violations in their contracts with doctors, says that antitrust laws do not take full account of the tremendous market forces arrayed against physicians.

“The playing field is tilted in favor of the HMOs,” Blumenthal said, adding that some revision of the laws is probably necessary to protect doctors. But he stopped short of endorsing an outright exemption.

The root of the doctors’ distress, however, goes far deeper than antitrust policy and is more complicated.

Twenty years ago, doctors were highly respected independent operators “who could charge what they wanted,” said Mark Peterson, editor of the Journal of Health Politics, Policy and Law at UCLA. Now, he said, many of them are treated with little deference and have little control over how much they are paid by HMOs and other insurers.

Physicians are fighting managed care on several fronts. They are the most potent political force behind legislation moving through Congress to give patients more rights against HMOs that deny or delay care. They are helping trial lawyers prepare class-action lawsuits charging HMOs with failing to deliver the care they promised to their members.

But many of them regard the antitrust laws as the greatest single obstacle to their campaign to regain some leverage in their dealings with insurers.

Under current law, doctors are not entirely on their own. The Justice Department has written complex rules under which doctors can form large groups that assume some of the risk of delivering care to patients for a set fee. Those groups can negotiate with HMOs, as many doctors have done in California. But a number of those groups are going bankrupt.

In addition, individual doctors may hire the same representative to act as their negotiator with HMOs. But the representative’s power is limited by a prohibition against orchestrating any coordinated activity against an HMO, such as demanding a specific provision in a contract or refusing to accept a particular payment rate.

The politics of the antitrust exemption bill scheduled for House action reflects a combination of pressure from interest groups and the passion of an individual member. Campbell has been championing similar legislation since his days in the California Legislature. His advocacy carries weight with fellow lawmakers because he was a tenured economist at Stanford University before entering politics and presents carefully reasoned arguments for why the antitrust exemption would have little effect on physician fees.

The result is that even though massive forces are arrayed against the measure, it has gained 220 co-sponsors and is widely expected to pass the 435-member House. If it does, it will go to the Senate, where a number of lawmakers are discussing the issue with the AMA. President Clinton has yet to make his views known, despite the opposition of the Justice Department and the FTC.

The bottom line: While Campbell’s bill is unlikely to become law in its current form, it may lead to changes in the way physician groups are treated by federal regulators.

Under Campbell’s bill, groups of independent doctors could band together to negotiate with managed care companies over their contracts. But they would be barred from conducting strikes or withholding care from patients.

The law would expire automatically in three years if Congress did not extend it. Campbell views the three-year sunset provision as a safety hatch. If doctors did collude in ways that affected prices, lawmakers could make adjustments in the law.

The Congressional Budget Office, the nonpartisan agency that analyzes the cost of legislation, estimates that the bill would result in a 4.5% increase in physicians’ fees, which would have a ripple effect throughout the health care system, pushing up overall prices. Antitrust experts both inside and outside the government agree that while doctors have many legitimate grievances with managed care companies, they would probably use an exemption from antitrust laws to look out for their own financial interests.

“The doctors are unhappy about a whole range of things, and they themselves could not sort out what part has to do with their fees and what part has to do with their independent practice of medicine,” said Sherry Glied, a professor of public health at Columbia University’s School of Public Health.

If the Campbell bill became law, she predicted, doctors would have trouble agreeing on how to demand better medical care for their patients, “and so they would end up bargaining about money.”